Following on from last month’s round-up, here are more tasty highlights from the ACT’s annual conference:
Global trade is becoming cheaper, faster and simpler due to the Electronic Trade Documents Act that came into force last September, according to Tim Reid, chief executive of UK Export Finance (picture above, on screen). “It means 60% of global trade finance, 80% of bills of lading, and most maritime shipping insurance transactions and processes are going to be digitalised.”
Reid said implementation of the Act combined with rapid standardisation of trade documents, “means we've squashed the process and transactions from two to three months on average to one hour, to give you a sense of the speed that is now coming into the system.
“For corporate treasurers it means you can manage and control cash better, get end to end data across your supply chain, achieve greater audit control, and gain agility and liquidity in a world that's volatile, uncertain and unpredictable,” said Reid.
Christof Nelischer, group treasurer of multinational digital advertising and marketing services provider S4 Capital, recounted his team’s efforts to implement an intercompany netting programme, revealing that they, in part, already had the solution.
Nelischer explained how he developed the programme to address complexities created by an acquisition-hungry model now operating in 30 countries, many of which have their own ERP systems. As a result, data was held in many different formats. So instead of explaining, training and setting up a new group of users, Nelischer opted to use the existing central system, with the wider organisation providing the data, which would then be converted and configured for this system.
“That cuts out a huge amount of initial groundwork in getting that system off the line,” he said. “As for what system you choose, my analogy is if the house is on fire, we don't form a committee to design the most appropriate bucket, you use the bucket you can find. If you have an ERP or a TMS that already has a modern netting module, then go for it, implement that one. If not, you just pick a proven third party hosting solution that works.”
Royston Da Costa, assistant treasurer at plumbing and heating products distributor Ferguson, suggested that an overwhelming majority of treasurers planned to implement AI for some kind of forecasting in the next 12 months.
“The question is, do we go along with it, or do we just stand by and ignore it?” said Da Costa. “I think most of us will agree we can’t afford to ignore it. That's kind of where we're going to go with this. I think we have to start looking at how we can incorporate the technology,” he added.
The finalisation of Basel III, known as Basel 3.1, set to take effect in the UK from 1 July 2025, will bring changes to banks, especially in calculating risk-weighted assets- meaning banks will have to reconsider their capital allocation strategies. As a result, treasurers will need to interpret how banks think about corporates’ credit risk, depending on whether they use a standardised or modelled approach, said Unity Trust Bank head of treasury Christopher Blake,
Edward Coxhead, Basel 3.1 optimisation director at HSBC, said the new rules could mean winners and losers within the banking industry. “A smaller bank on a standardised approach is going to see more risk sensitivity, that means giving higher risk assets a higher capital charge, whereas lower risk assets might get a lower capital charge. For large institutions using a modelled approach, we might see less sensitivity,” he added.
“You need to shop around, as some banks are going to be affected more than others,” said Blake, who is also education director of the UK Asset & Liability Management Association (UKALMA).
The US version of the rules, compared to European and UK, are considered so conservative- and therefore problematic by US banks- that they paid for an advert called Basel III Endgame that was seen on billboards on highways, airports and even sporting events. “It’s not often that banking regulation makes the Super Bowl,” said Liam Girvan, an associate at Deloitte.
KPMG’s Stewart Hagell offered guidance for navigating the IASB’s (International Accounting Standards Board) exposure draft contracts for renewable electricity. Published to gain public comment by 7 August, the exposure draft contracts are an attempt by the IASB to address challenges companies are facing in respect of purchase price accounting (PPA), said Hagell, who heads up the firm’s UK Corporate Treasury Services function.
When it comes to hedge accounting implications, Hagell said PPAs and virtual PPAs that do not meet the own use exemption are accounted for as derivatives and measured at FVTPL (fair value through profit or loss).
“Applying hedge accounting could help companies to reduce profit or loss volatility by reflecting how these PPAs hedge the price of future electricity purchases or sales, said colleague Stevan Gostovic, a director in KPMG Corporate Treasury Services.
Lawrie Holmes is a freelance business and finance journalist
The ACT Annual Conference 2025 will be held at ICC Wales 20-21 May. Register your interest